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Subway<\/a> has become the latest front of the cola wars. Pepsi reached an agreement with the sandwich chain to become its sole drink supplier across all U.S. stores, replacing Coca-Cola<\/a>,, Subway announced<\/a> Tuesday. Subway also extended its preexistent contract with Pepsi-subsidiary Frito-Lay<\/a>, which will provide snacks to the chain through 2030.<\/p>\n \u201cFor nearly twenty years, The Coca-Cola Company has proudly served Subway restaurants in the U.S,\u201d Coca-Cola told Fortune<\/em> in a statement. \u201cWe are committed to serving Subway through the end of this year and will remain focused on delivering value for Subway, their Franchisee Partners, and consumers.\u201d<\/p>\n Subway customers will begin to see products like Sprite, Fanta and Diet Coke replaced with Mountain Dew, Tropicana, and Gatorade starting in January 2025.<\/p>\n The deal is the latest step the snack and drink conglomerate has taken to usurp Coca-Cola as the highest-valued beverage company<\/a>. Stocking Coke products in all 20,000 of its U.S. stores, Subway was Coca-Cola\u2019s biggest fountain account<\/a> by number of store locations, per Beverage Digest. Subway has about 37,000 locations worldwide.<\/p>\n These supplier switches aren\u2019t unprecedented. On Monday, Cincinnati chain Skyline Chili announced<\/a> it would switch from Pepsi to Coke products starting next month. Its midwestern neighbor, Wisconsin burger chain Culver\u2019s, made the same switch<\/a> in January 2023.\u00a0<\/p>\n Subway has hung its hat on consistent positive same-store sales<\/a>, including a 6.4% increase in global same-store sales in 2023 compared to the year before. It announced Tuesday<\/a> a franchise agreement with private investment fund McWin that would see it open 600 new stores across Europe.<\/p>\n Some of Subway\u2019s good fortune could also rub off on Pepsi, which saw slowed fourth-quarter revenue growth<\/a> due to repeated price hikes, despite posting profits that exceeded expectations and 5.9% net revenue performance for the year.\u00a0<\/p>\n Meanwhile, Coke posted a $641 million fourth-quarter gross profit, a 7% leap from the same period the year before. Net revenues grew 6% for 2023, according to its earnings report<\/a>. Even with the loss of Subway, Coca-Cola still has something that Pepsi doesn\u2019t: growing sales volumes. It had 10% growth in price\/mix and 2% growth in concentrate sales, per its earnings.<\/p>\n The two beverage giants have traded blows for decades and if Subway\u2019s deal with Pepsi is any indication, the two companies will continue to battle for the top spot in the beverage industry.<\/p>\n The soda industry in general has been hurt by high prices<\/a>, weight loss drugs<\/a>, and Gen Z\u2019s interest in healthier drink alternatives<\/a>, yet Coke and Pepsi\u2019s strategies have differed in trying to compete with one another.<\/p>\n Coke has been helped by its away-from-home sales<\/a>\u2014like in movie theaters and restaurants\u2014in the past and has relied on international markets<\/a> in Mexico and Germany to prop up sagging U.S. demand. The company also uses independent bottlers while Pepsi owns about 75% of its North American bottling operations<\/a>. Meaning, Coke has to invest fewer resources in packaging beverages. While Coke has mastered the drinks market, Pepsi\u2019s success has been in huge part because of Frito-Lay, which nearly matched Pepsi\u2019s beverage revenue<\/a> for most of 2023.\u00a0<\/p>\n Both behemoths are taking big swings to attract Gen Z consumers: Coke recently launched a spicy flavor<\/a> and \u201cHappy Tears,\u201d a salty, sugar-free soda sold in a chrome briefcase only on TikTok Shop. Pepsi\u2019s Doritos-flavored cocktail<\/a> and promotion of its savory snacks as side dishes<\/a> for meals similarly appeal to younger audiences.<\/p>\n In a hat tip to its beverage market, next week Pepsi will launch its first new product line<\/a> in six years: Bubly Burst, a lightly sweetened seltzer that piggybacks on the Bubly line originally launched in 2018 to compete with La Croix. It\u2019s part of Pepsi\u2019s growing interest in better-for-you beverages<\/a> that have surged in popularity among young people<\/a>. Olipop, an independent company which brands itself as a healthy soda, is targeting $400 million in sales<\/a> this year, up from $250 million last year.<\/p>\n \u201cThe biggest challenge will probably be just making sure that the product is like something people actually want to buy in bulk,\u201d Nik Sharma, CEO of brand strategy agency Sharma Brands, told Modern Retail.<\/p>\n<\/div>\n\nThe cola duel continues<\/strong><\/h2>\n
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